A posting on Strategy and Business (S+B) (formerly Booz and Company) portal, Demand Growing for Supply Chain Execs, has drawn some mixed views and/or headlines among supply chain media outlets. The commentary itself reinforces the good news, and sometime, not- so-good news that this author often reminds audiences about. In this Supply Chain Matters commentary, we weigh-in with our own observations and insights regarding study takeaways.
The good news that is communicated by S+B are statements that supply chain management has become of crucial concern to multinational firms. As we often remind our readers, there is not a week that goes by without business media news directly related to any firm’s supply chain management strategies and/or developments. The article further reinforces evidence that more senior executives have keen awareness and/or backgrounds within the broad tenets of supply chain management. We have pointed out in our postings, senior executives and yes, CEO’s from firms such as Apple, BMW, General Motors, McCormack Foods and others that came through the ranks of manufacturing, operations and supply chain management.
The not so good news is portrayed by a reference to a recent study conducted by Swiss Federal Institute of Technology, which is billed as to document the presence and impact of supply chain managers on large U.S. firms. More specifically, the study’s conclusion is that studied firm’s that have a Chief Supply Chain Officer (CSCO), have posted lower operating profit margins than those without one. This was the basis of mixed reactions among supply chain media.
This author will state up-front that I have not had the opportunity to review in-detail, the referenced Swiss Institute study. However, we do feel compelled to also weigh-in.
The S+B commentary clarifies that about three-fourths of the firms surveyed in the Swiss Federal Institute study had no top manager directly responsible for supply chain management. Further noted was that the percentage of high-level officers with supply chain management backgrounds is “exceedingly low”, accounting for less than 3 percent of top executives. Thus, by our view, any conclusion that firm’s with CSCO’s posted lower operating margins is not all that meaningful, since the majority of firms surveyed had no senior supply chain management leadership influence among the top ranks.
The commentary however, makes a more pertinent observation:
“It could be that firms with especially low performance and earnings tend to be the ones that need to install a CSCO in a bid to restructure operations, slash costs, and lays the groundwork for better future returns. Perhaps firms that are doing well simply have less impetus to alter the status quo.”
In other words, executives granted the broadest end-to-end supply chain leadership and accountability have certain mandates to address existing value-chain challenges and to improve business outcomes.
By the lens of Supply Chain Matters, that is the real takeaway message, namely that effective supply chain management is indeed crucial for today’s manufacturers, retailers and service providers and that the accountability for required business outcomes now jointly rests with senior supply chain executives and their other top management peers. We are transitioning from an era of measures of Key Performance Indicators (KPI’s) to those related to Key Business Outcomes Indicators (KBO’s).
The sub-headline, “There’s value in elevating supply chain management to the domain of the top management team”, is really the main headline, and should be viewed as such.
Supply chain management leaders and their teams now have the opportunity to directly impact business and bottom-line results, each and every day, and that is good news.